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Swarnabharath

This topic provides information about the gold schemes launched by the government.

Contents

India has an estimated 20,000 tonnes of gold lying idle with Indian households and institutions. The following schemes are aimed at bringing the gold lying with citizens into the economy, and at reducing India’s dependence on gold imports.

Sovereign Gold Bond (SGB) Scheme

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on the amount of initial investment. Interest will be credited semiannually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

The Reserve Bank of India, in consultation with the Government of India, has issued twenty one tranches of Sovereign Gold Bonds for a total value of approximately Rs 6650 crores as on January 2018.

Sovereign Gold Bond, 2018-19

Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds-2018-19. The Sovereign Gold Bonds will be issued every month from October 2018 to February 2019 as per the calendar specified below:

S. No.

Tranche

Period of Subscription

Date of Issuance

1

2018-19 Series II

October 15-19, 2018

October 23, 2018

2

2018-19 Series III

November 05-09, 2018

November 13, 2018

3

2018-19 Series IV

December 24-28, 2018

January 01, 2019

4

2018-19 Series V

January 14–18, 2019

January 22, 2019

5

2018-19 Series VI

February 04-08, 2019

February 12, 2019

The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The features of the Bond are given below:

Sl. No.

Item

Details

1

Product name

Sovereign Gold Bond 2018-19

2

Issuance

To be issued by Reserve Bank India on behalf of the Government of India.

3

Eligibility

The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.

4

Denomination

The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

5

Tenor

The tenor of the Bond will be for a period of 8 years with exit option in 5th, 6th and 7th year, to be exercised on the interest payment dates.

6

Minimum size

Minimum permissible investment will be 1 gram of gold.

7

Maximum limit

The maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time. A self-declaration to this effect will be obtained. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchase from the Secondary Market.

8

Joint holder

In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.

9

Issue price

Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period.The issue price of the Gold Bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode.

10

Payment option

Payment for the Bonds will be through cash payment (upto a maximum of Rs 20,000) or demand draft or cheque or electronic banking.

11

Issuance form

The Gold Bonds will be issued as Government of India Stocks under GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into demat form.

12

Redemption price

The redemption price will be in Indian Rupees based on simple average of closing price of gold of 999 purity of previous 3 working days published by IBJA.

13

Sales channel

Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices as may be notified and recognised stock exchanges viz., National Stock Exchange of India Ltd and Bombay Stock Exchange Ltd, either directly or through agents.

14

Interest rate

The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value.

15

Collateral

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. The lien on the bonds shall be marked by the depositary by the authorized banks. The loan against SGBs would be subject to decision of the lending bank/institution and cannot be inferred as a matter of right by the SGB holder.

16

KYC Documentation

Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investor(s).

17

Tax treatment

The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond

18

Tradability

Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.

19

SLR eligibility

Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.

20

Commission

Commission for distribution of the bond shall be paid at the rate Rupee one per hundred Rupees the total subscription received by the receiving offices and receiving offices shall share at least paise 50 per hundred Rupees of the commission so received with the agents or sub agents for the business procured through them.

Benefits

The Sovereign Gold Bonds will be available both in demat and paper form.

The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years.

They will carry sovereign guarantee both on the capital invested and the interest.

Bonds can be used as collateral for loans.

Bonds would be allowed to be traded on exchanges to allow early exits for investors who may so desire.

The Capital gain tax arising on redemption of SGB to an individual is exempted.

How and where to buy it

Sovereign Gold Bonds will be issued on payment of rupees and denominated in grams of gold. Minimum investment in the bond shall be 1 grams. The bonds can be bought by Indian residents or entities and is capped at 500 grams.

Investors can apply for the bonds through scheduled commercial banks and designated post offices. NBFCs, National Saving Certificate (NSC) agents and others, can act as agents. They would be authorised to collect the application form and submit in banks and post offices.

Gold Monetisation scheme

It is a gold savings account which will earn interest for the gold that you deposit in it. Your gold can be deposited in any physical form – jewellery, coins or bars. This gold will then earn interest based on gold weight and also the appreciation of the metal value. You get back your gold in the equivalent of 995 fineness gold or Indian rupees as you desire (the option to be exercised at the time of deposit).

The Gold Monetisation Scheme will replace the existing Gold Deposit Scheme, 1999. However, deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them.

Benefits

The gold monetisation scheme earns interest for your gold jewellery lying in your locker. Broken jewellery or jewellery that you don't want to wear can earn interest for you in gold.

Earnings are exempt from capital gains tax, wealth tax and income tax. There will be no capital gains tax on the appreciation in the value of gold deposited, or on the interest you make from it.

Term involved

The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes.

Who and where can the account be opened?

Resident Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme. The opening of gold deposit accounts will be subject to the same rules with regard to customer identification as are applicable to any other deposit account.

Modifications in the Gold Monetisation Scheme

In consultation with Government, RBI has issued a Master Direction on GMS on 21st January, 2016, which amends the Master Direction dated 22nd October, 2015 earlier issued by RBI on GMS. The changes made in the scheme are given below:-

Premature redemption under Medium and Long Term Government Deposits (MLTGD) Any Medium Term Deposit will be allowed to be withdrawn after 3 years and any Long Term Deposit after 5 years. These will be subject to a reduction in the interest payable.

Fees to be paid to Banks for their services i.e. gold purity testing charges, refining, storage and transportation charges etc. on Medium and Long Term Gold Deposits. Effectively the banks would be getting a 2.5 % commission for the scheme which will include the charges payable to the Collection and Purity Testing Centres/Refiners.

Gold depositors can also give their gold directly to the refiner rather than only through the Collection and Purity Testing Centres (CPTCs). This will encourage the bulk depositors including Institutions to participate in the scheme.

Bureau of Indian Standards (BIS) has modified the licensing condition for refiners already having National Accreditation Board for Testing and Calibration Laboratories (NABL) accreditation from the existing three years refining experience to one year refining experience. This is likely to increase the number of licensed refiners.

BIS has published an Expression of Interest (EOI) on its website inviting applications from the more than 13,000 licensed jewellers to act as a CPTC in the scheme, provided they have tie-up with BIS’s licensed refiners.

The quantity of gold collected under the scheme will be expressed up to three decimals of a gram. This will give the consumer better value for the gold deposited.

Gold to be deposited with the CPTCs/Refineries can be of any purity. The CPTC/Refiner will test the gold and determine its purity which will be basis on which the deposit certificate will be issued.

Banks are free to hedge their positions in the case of short-term deposits.

Issues like the method of interest calculation and mechanism for taking loans against GMS deposits have also been clarified. Indian Banks Association (IBA) will communicate the list of the BIS licensed CPTCs and refiners to the banks.To increase awareness among depositors, Government had continued the Media campaign in AIR and FM radio. Print media and Mobile SMS campaign is also being undertaken.

It is again clarified that Tax exemptions under the GMS include exemption of interest earned on the gold deposited and exemption from capital gains made through trading or at redemption. It is also reiterated that as per CBDT instructions No. 1916 dated 11th May, 1994, in course of IT Search u/s 132, gold jewellery to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized by tax authorities.

The scheme has been further modified on 31st March, 2016. Now, for the gold deposited under Medium and Long Term Government Deposits (MLTGD), the redemption of principal at maturity shall, at the option of the depositor, be either in Indian Rupee equivalent of the value of deposited gold at the time of redemption or in gold. Where the redemption of the deposit is in gold, an administrative charge at a rate of 0.2% of the notional redemption amount in terms of INR shall be collected from the depositor. However, the interest accrued on MLTGD shall be calculated with reference to the value of gold in terms of Indian Rupees at the time of deposit and will be paid only in cash.

Indian Gold Coin

The Indian Gold Coin is part of Indian Gold monetisation program. The coin will be the first ever national gold coin will have the national emblem of Ashok Chakra engraved on one side and the face of Mahatma Gandhi on the other side. Initially, the coins will be available in denominations of 5 and 10 grams. A 20 grams bar/bullion will also be available. The Indian Gold Coin is unique in many respects and will carry advanced anti-counterfeit features and tamper-proof packaging that will aid easy recycling.

Coin features

Purity - The Indian gold coin will be of 24 karat purity and 999 fineness.

Hallmarked - All coins will be hallmarked as per the BIS standards.

Security - The tamperproof packaging and advanced anti-counterfeit features on the coin cover make s it very safe and easily recyclable.